[Calc Review] Help me analyze this deal in West Chester PA

3 Replies

Hi - completely new to the game of rental real estate. Although I'm not targeting this particular area or home type, I'm looking into it because I have an angle on the homeowner. However, I can't make these numbers work even if I lower purchase price by 20-25%.

Is it possible that property taxes can be so high in a particular area it's completely infeasible to turn a profit off a rental home? I'm being conservative with nearly all my numbers and then removing costs for property management (I'll take that on). I still can't get anything close to 12% ROI. I think the rental rate I've estimated is fair for the area. Thx!

View report

*This link comes directly from our calculators, based on information input by the member who posted.

Hi @NA Miller Seems to me like you either need to get way more in rent or look at less expensive properties. Many folks on here subscribe to the 1% rule where your monthly rent should be at least 1% of your all-in price. In this case you are only at about .75%. I would hope at this price point that your repair budget and a few other items are overestimated, which should make this cash flow number better. The real play here is mortgage pay down and hopefully some appreciation. I am not the best to talk to in this area though because I use the 2% rule on much lower priced properties. 

Good luck! Let me know if I can be helpful in any way. 

@NA Miller  Taxes can definitely "be so high in a particular area it's completely infeasible to turn a profit off a rental home" but you can't change that and you can always count on them going up over time.   

What size/configuration are each of the units and is this in a nice area in West Chester?  $3200 monthly rent on a 4 unit seems kinda low for West Chester based on what I've seen recently.  $800/unit would rent out very quickly though. 

Also, I think you're closing cost estimate is very low.  Is this an actual number from a lender?

West Chester is tough as it is very competitive and the prices don't always make sense for cash-flow rentals in this market.  In my observations, a lot of well off people in the area seem to use these investments for tax reductions and not cash flow investments, making the cash flow properties even harder to find as prices are inflated by that demand and they could care less about positive cash flow.

If you can boost rents to 1% or more of the purchase price as @Rich O'Neill suggests, you'll find its probably much closer to a worthwhile investment. I do think you're going to have a tough time finding 12% ROI on a multi-unit in West Chester any time soon. That said, I think West Chester is a good market and a lower ROI can still make sense depending on your strategy and ultimate goal.

Cheers

@Rich O'Neill & @Jordan S. -- Thanks so much for your prompt responses and useful insights.. I was thinking about this deal today at work and remembered as well this home was situated on over 5 acres of land. Of course the property taxes would be excessive and would render rental calculations infeasible! 

Jordan your additional insights on West Chester rentals in general are really beneficial for me (or anyone) learning the ropes by analyzing deals in areas outside of more suitable neighborhoods and price ranges. And yes my closing estimates were way low. Thanks again

What really gets me is the sense of community here in the BP forums. This membership looks to be paying off in spades. Thanks for such advantageous responses on my very first post. I really appreciate it